Banks that loaned hundreds of millions to the troubled Atlas Jewellery chain say they suspect a wilful default by the group, with industry sources saying money was diverted to the Bombay Stock Exchange (BSE).

The founding chairman, M.M. Ramachandran, used funds borrowed from UAE banks to buy 51 per cent equity in a defunct company, GEE Wollens, and renamed it Atlas Jewellery India, the sources said.

No charges have been filed by authorities and the allegations have not been tested in court. Gulf News, however, is in possession of the latest audited balance sheet of Atlas Jewellery group in Dubai which shows the company posted a net profit of Dh20.3 million and had a healthy inventory of stocks and other assets.

In addition, other documents suggest diversion of funds. The documents indicate that in June 2013, three free zone companies — Al Juraina Precious Metals, Al Layyah General Trading FZE and Mankhool General Trading — all described as trading in precious metals and bullion — were formed in Sharjah Free Zone.

They bought shares in GEE Wollens, a defunct company listed in the BSE in 2014. Ramachandran then bought off the shares from the three companies amounting to 51 per cent equity and later changed the name of the company to Atlas India.

The shares of this company went up to Rs 200 apiece but closed on Rs 40 on Friday. A simple web search reveals identical description, time and formation of the three companies.

Each company has listed one "promoter", one phone number and does not mention the staff strength.

The description of each company and its promoter is identical — Juraina Precious Metal’s promoter is Surjith Mullam Poyil and Mankhool General Trading FZE lists its "promoter" as Sankara Pillai Padmakshan Nair while Al Layyah General Trading lists its "promoter" as Jamsheer Kuriyil Narikuni.

For example, one such description reads: “Al Juraina Precious Metal and Bullion is promoted by Surjith Mullam Poyil who is well exposed to the markets in the UAE in various commodities.

"He was trading in different establishment names which gave him sufficient experience. Al Juraina Precious Metal and Bullion to its credit is already executing orders to the tune of over Dh201.11 million.”

The description is identical for other companies too.

A Bloomberg listing of these three companies reveals no history of transactions in one year, no key executives or board members.

In fact, the website for Juraina Precious Metals is incomplete with garbled Latin script. It also has photographs of some prominent British nationals not connected to the company.

When contacted by Gulf News, Poyil claimed he sold shares of GEE Wollens to Ramachandran and said that he was a former assistant manager for three years in Atlas Jewellery Dubai.

No one responded to the phone numbers given on the other two websites -- Mankhool General Trading and Al Layyah General Trading -- which also list among other things trading in general medical supplies other than bullion and precious metals.

A senior banker, meanwhile, told Gulf News that while defaults have been happening and the morale of the industry is low, this is not a case of default due to financial contingency.

“We are trying to prove that this is a wilful default where funds were diverted over a period of one to two years. Banks have no collaterals against which they lend credit facilities to big organisations.

"Everything is based on audit reports and Atlas Jewellery’s audit report for March 2014 showed a reasonable profit and healthy asset strength.

The banker added: "A survey of its branches had revealed healthy stock. There was no reason for us to doubt the credibility of such a reputed group when so many other banks had also extended credit facilities.

"We take informed decisions based on an industry profile of the company, its reputation in the market, its stocks, assets and its audited balance sheets. Going by those benchmarks the company was doing fine. So can we declare this system of extending credit without collaterals faulty?”